Regulators conclude consultation on revising OTC derivative Clearing Rules

In March 2023, the Securities and Futures Commission of Hong Kong (SFC) and the Hong Kong Monetary Authority (HKMA) launched a joint consultation on proposed revisions to the Securities and Futures (OTC Derivative Transactions – Clearing and Record Keeping Obligations and Designation of Central Counterparties) Rules in view of the global benchmark rate reform and the transitioning away from inter-bank offered rates (IBORs) to alternative reference rates (ARRs).
The regulators thereby sought to amend Schedule 1 of the rules setting out the OTC derivatives subject to the central clearing requirement once the clearing threshold is reached, to eliminate all LIBOR referencing swaps and EONIA (Euro OverNight Index Average) referencing swaps. Additionally, the two regulators proposed to implement new clearing requirements for certain swap transactions and to revise the obligation to clear transactions referencing GBP – SONIA (Sterling Overnight Index Average) to include all overnight index swaps (OIS) with tenors ranging from seven days to 50 years.
—
The two regulators have now published a corresponding consultation conclusion paper in which they briefly summarize the feedback they have received to the consultation and the way forward in this matter. Specifically, the regulators note that respondents greatly appreciated and supported the proposed adjustment to the schedule, although some requested the implementation date of the revisions to be harmonized with the transition dates of the referenced benchmarks.
As a consequence, the regulators will go ahead as proposed and implement the following changes to the schedule; please note that the picture is taken from the consultation, as it clearly illustrates the finalized changes:
Table 1 through 3 – Final changes to schedule 1 including OTC-instruments subject to the central clearing obligation